Judgment summary
This appeal concerned a demand for Excise Duty and Value Added Tax issued by the Commissioner of Domestic Taxes against Alufacade Kenya Ltd, following the enactment of the Excise Duty (Amendment) Act, No. 2 of 2025. The Appellant had imported float glass under HS Code 7005 on 27th March 2025, at a time when the Tax Laws (Amendment) Act, 2024 imposed excise duty only on goods under HS Code 7007.
The Excise Duty (Amendment) Act, 2025, assented to on 17th April 2025, corrected the tariff classification from 7007 to 7005, but stated that its effective date remained 27th December 2024. The Respondent relied on this correction to demand Kshs 720,744.00 in principal Excise Duty and a total of Kshs 6,122,480.00 in Excise Duty and VAT.
The Tribunal held that the Respondent's additional assessment was not justified, finding that the error in tariff classification was attributable to the legislature and not to the Appellant, and that the Appellant had a legitimate expectation that the law as it stood at the time of importation would apply. The appeal was allowed and the Objection Decision dated 23rd October 2025 was set aside.
Background
The Appellant is a limited liability company whose principal business activity is the purchase and sale of glass products (paragraph 1). The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act Cap 469 Laws of Kenya, mandated under Sections 5(1) and 5(2) to collect and administer tax revenue (paragraph 2).
The Respondent issued a demand for tax to the Appellant on 28th August 2025 of Kshs 720,744.00 (Excise Duty) and Kshs 6,122,480.00 (VAT) (paragraph 3). The Appellant objected by letter dated 26th September 2025, and the Respondent issued its Objection Decision on 23rd October 2025 (paragraph 4). The Appellant filed its Notice of Appeal dated 13th November 2025 on the same date (paragraph 5).
Core dispute
The Appellant argued that the Respondent erred in law and fact by relying retrospectively on the Excise Duty (Amendment) Act, 2025 to assess and demand additional Excise Duty and VAT of Kshs 6,122,480.00, when it had imported float glass under HS Code 7005 on 27th March 2025, at a time when only goods under HS Code 7007 attracted excise duty under the Tax Laws (Amendment) Act, 2024, as confirmed by a Public Notice of 27th December 2024 (paragraphs 6a, 8-11).
The Appellant further contended that the Respondent's own Review Decision admitted an inherent ambiguity, in that the Excise Duty Amendment corrected an erroneous citation of tariff heading 7007 to 7005, and that such ambiguity should be resolved in favour of the taxpayer under the contra fiscum principle (paragraphs 6b, 29-33, 51-53).
The Appellant also argued that the Respondent erred in relying on High Court Kisumu Constitutional Petition No. E017 of 2025, Peter Imbayi Indasi v State Law Office & Kenya Revenue Authority, to demand principal Excise Duty of Kshs 720,744.00, contending that petition concerned only the mode of computing excise duty (specific rate versus ad valorem rate) under HS Code 7007, and not the applicability of excise duty to goods under HS Code 7005 (paragraphs 6c, 35-40, 54-56).
The Respondent maintained that the Excise Duty (Amendment) Act, No. 2 of 2025 merely corrected an erroneous tariff citation from 7007 to 7005, and that Paragraph 1 of the Amendment Act explicitly stated its effective date remained 27th December 2024, meaning it neither applied the law retrospectively nor acted on the basis of ambiguity (paragraphs 59-61, 67-68).
Court findings
The Tribunal identified a single issue for determination, namely whether the Respondent's additional assessment was justified (paragraph 70).
The Tribunal found that the Appellant had imported goods under HS Code 7005 on 27th March 2025, and that at the time of importation those goods were not subject to Excise Duty, since the Tax Laws (Amendment) Act, 2024 and the Public Notice of 27th December 2024 referred to HS Code 7007 (paragraphs 71-72).
The Tribunal noted that the Respondent's own Objection Decision, at paragraphs 1.1 to 1.3, admitted that the description of the product had been given with insufficient detail, resulting in an erroneous citation of tariff heading 7007 instead of 7005, which was subsequently corrected by the Excise Duty (Amendment) Act No. 2 of 2025 of 17th April 2025 (paragraph 73).
The Tribunal held that this admitted error created a legitimate expectation on the part of the Appellant, and that it would be unjust to retrospectively demand tax from the Appellant for an error not attributable to it, particularly where the goods may already have been sold at prices reflecting the non-charging of Excise Duty (paragraph 74).
Relying on Noor Machar Hussein & 4 others v Minister of State for Planning National Development and Vision 2030 & others (2012) and Kenya Revenue Authority v Export Trendy Company Limited (Petition No. 20 of 2020) (2022), the Tribunal found that exercising statutory power contrary to legitimate expectations, or in a manner that is irrational or unreasonable, warrants intervention (paragraphs 75-76).
The Tribunal concluded that while enactment of law brings order and justice, laws should not be applied so as to cause injustice due to another party's errors, and found that the Respondent's additional assessments were not justified (paragraphs 77-78).
Outcome
The Tribunal found the appeal meritorious. It ordered that the appeal be allowed, that the Respondent's Objection Decision dated 23rd October 2025 be set aside, and that there be no orders as to costs (paragraph 79).
Major issues / areas of contention
- Whether the Respondent could rely on the Excise Duty (Amendment) Act, 2025 to retrospectively demand Excise Duty and VAT in respect of goods imported before its enactment.
- Whether the Respondent's admission of an error in tariff classification in the Tax Laws (Amendment) Act, 2024 created an ambiguity that should be resolved in favour of the taxpayer under the contra fiscum principle.
- Whether the Appellant had a legitimate expectation that its importation would be assessed under the tax law in force at the time of importation.
- Whether the Respondent erred in relying on High Court Kisumu Constitutional Petition No. E017 of 2025 to demand principal Excise Duty from the Appellant.
- Whether the Respondent's additional assessment of Kshs 6,122,480.00 and demand for Kshs 720,744.00 was justified.